Sec. 4980I. Excise Tax On High Cost Employer-Sponsored Health Coverage [Repealed]

Editor's Note: Pub. L. 116-94, Div. N, Sec. 503(a), struck Sec. 4980I, effective for taxable years beginning after December 31, 2019. Note that Sec. 4980I never took effect because it was scheduled to become effective for taxable years beginning after December 31, 2021.

I.R.C. § 4980I(a) Imposition Of Tax —

If—

I.R.C. § 4980I(a)(1) —

an employee is covered under any applicable employer-sponsored coverage of an employer at any time during a taxable period, and

I.R.C. § 4980I(a)(2) —

there is any excess benefit with respect to the coverage,

there is hereby imposed a tax equal to 40 percent of the excess benefit.

I.R.C. § 4980I(b) Excess Benefit —

For purposes of this section

I.R.C. § 4980I(b)(1) In General —

The term “excess benefit” means, with respect to any applicable employer-sponsored coverage made available by an employer to an employee during any taxable period, the sum of the excess amounts determined under paragraph (2) for months during the taxable period.

I.R.C. § 4980I(b)(2) Monthly Excess Amount —

The excess amount determined under this paragraph for any month is the excess (if any) of—

I.R.C. § 4980I(b)(2)(A) —

the aggregate cost of the applicable employer-sponsored coverage of the employee for the month, over

I.R.C. § 4980I(b)(2)(B) —

an amount equal to 1/12 of the annual limitation under paragraph (3) for the calendar year in which the month occurs.

I.R.C. § 4980I(b)(3) Annual Limitation —

For purposes of this subsection—

I.R.C. § 4980I(b)(3)(A) In General —

The annual limitation under this paragraph for any calendar year is the dollar limit determined under subparagraph (C) for the calendar year.

I.R.C. § 4980I(b)(3)(B) Applicable Annual Limitation

I.R.C. § 4980I(b)(3)(B)(i) In General —

Except as provided in clause (ii), the annual limitation which applies for any month shall be determined on the basis of the type of coverage (as determined under subsection (f)(1)) provided to the employee by the employer as of the beginning of the month.

I.R.C. § 4980I(b)(3)(B)(ii) Multiemployer Plan Coverage —

Any coverage provided under a multiemployer plan (as defined in section 414(f)) shall be treated as coverage other than self-only coverage.

I.R.C. § 4980I(b)(3)(C) Applicable Dollar Limit

I.R.C. § 4980I(b)(3)(C)(i) 2018 —

In the case of 2018, the dollar limit under this subparagraph is—

I.R.C. § 4980I(b)(3)(C)(i)(I) —

in the case of an employee with self-only coverage, $10,200 multiplied by the health cost adjustment percentage (determined by only taking into account self-only coverage), and

I.R.C. § 4980I(b)(3)(C)(i)(II) —

in the case of an employee with coverage other than self-only coverage, $27,500 multiplied by the health cost adjustment percentage (determined by only taking into account coverage other than self-only coverage).

I.R.C. § 4980I(b)(3)(C)(ii) Health Cost Adjustment Percentage —

For purposes of clause (i), the health cost adjustment percentage is equal to 100 percent plus the excess (if any) of—

I.R.C. § 4980I(b)(3)(C)(ii)(I) —

the percentage by which the per employee cost for providing coverage under the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan for plan year 2018 (determined by using the benefit package for such coverage in 2010) exceeds such cost for plan year 2010, over

I.R.C. § 4980I(b)(3)(C)(ii)(II) —

55 percent.

I.R.C. § 4980I(b)(3)(C)(iii) Age And Gender Adjustment

I.R.C. § 4980I(b)(3)(C)(iii)(I) In General —

The amount determined under subclause (I) or (II) of clause (i), whichever is applicable, for any taxable period shall be increased by the amount determined under subclause (II).

I.R.C. § 4980I(b)(3)(C)(iii)(II) Amount Determined —

The amount determined under this subclause is an amount equal to the excess (if any) of—

I.R.C. § 4980I(b)(3)(C)(iii)(II)(aa) —

the premium cost of the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan for the type of coverage provided such individual in such taxable period if priced for the age and gender characteristics of all employees of the individual's employer, over

I.R.C. § 4980I(b)(3)(C)(iii)(II)(bb) —

that premium cost for the provision of such coverage under such option in such taxable period if priced for the age and gender characteristics of the national workforce.

I.R.C. § 4980I(b)(3)(C)(iv) Exception For Certain Individuals —

In the case of an individual who is a qualified retiree or who participates in a plan sponsored by an employer the majority of whose employees covered by the plan are engaged in a high-risk profession or employed to repair or install electrical or telecommunications lines—

I.R.C. § 4980I(b)(3)(C)(iv)(I) —

the dollar amount in clause (i)(I) shall be increased by $1,650, and

I.R.C. § 4980I(b)(3)(C)(iv)(II) —

the dollar amount in clause (i)(II) shall be increased by $3,450.

I.R.C. § 4980I(b)(3)(C)(v) Subsequent Years —

In the case of any calendar year after 2018, each of the dollar amounts under clauses (i) (after the application of clause (ii)) and (iv) shall be increased to the amount equal to such amount as determined for the calendar year preceding such year, increased by an amount equal to the product of—

I.R.C. § 4980I(b)(3)(C)(v)(I) —

such amount as so determined, multiplied by

I.R.C. § 4980I(b)(3)(C)(v)(II) —

the cost-of-living adjustment determined under section 1(f)(3) for such year (determined by substituting the calendar year that is 2 years before such year for “2016” in subparagraph (A)(ii) thereof), increased by 1 percentage point in the case of determinations for calendar years beginning before 2020.

If any amount determined under this clause is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.

I.R.C. § 4980I(c) Liability To Pay Tax —

I.R.C. § 4980I(c)(1) In General —

Each coverage provider shall pay the tax imposed by subsection (a) on its applicable share of the excess benefit with respect to an employee for any taxable period.

I.R.C. § 4980I(c)(2) Coverage Provider —

For purposes of this subsection, the term “coverage provider” means each of the following:

I.R.C. § 4980I(c)(2)(A) Health Insurance Coverage —

If the applicable employer-sponsored coverage consists of coverage under a group health plan which provides health insurance coverage, the health insurance issuer.

I.R.C. § 4980I(c)(2)(B) HSA And MSA Contributions —

If the applicable employer-sponsored coverage consists of coverage under an arrangement under which the employer makes contributions described in subsection (b) or (d) of section 106, the employer.

I.R.C. § 4980I(c)(2)(C) Other Coverage —

In the case of any other applicable employer-sponsored coverage, the person that administers the plan benefits.

I.R.C. § 4980I(c)(3) Applicable Share —

For purposes of this subsection, a coverage provider's applicable share of an excess benefit for any taxable period is the amount which bears the same ratio to the amount of such excess benefit as—

I.R.C. § 4980I(c)(3)(A) —

the cost of the applicable employer-sponsored coverage provided by the provider to the employee during such period, bears to

I.R.C. § 4980I(c)(3)(B) —

the aggregate cost of all applicable employer-sponsored coverage provided to the employee by all coverage providers during such period.

I.R.C. § 4980I(c)(4) Responsibility To Calculate Tax And Applicable Shares

I.R.C. § 4980I(c)(4)(A) In General —

Each employer shall—

I.R.C. § 4980I(c)(4)(A)(i) —

calculate for each taxable period the amount of the excess benefit subject to the tax imposed by subsection (a) and the applicable share of such excess benefit for each coverage provider, and

I.R.C. § 4980I(c)(4)(A)(ii) —

notify, at such time and in such manner as the Secretary may prescribe, the Secretary and each coverage provider of the amount so determined for the provider.

I.R.C. § 4980I(c)(4)(B) Special Rule For Multiemployer Plans —

In the case of applicable employer-sponsored coverage made available to employees through a multiemployer plan (as defined in section 414(f)), the plan sponsor shall make the calculations, and provide the notice, required under subparagraph (A).

I.R.C. § 4980I(d) Applicable Employer-Sponsored Coverage; Cost —

For purposes of this section—

I.R.C. § 4980I(d)(1) Applicable Employer-Sponsored Coverage

I.R.C. § 4980I(d)(1)(A) In General —

The term “applicable employer-sponsored coverage” means, with respect to any employee, coverage under any group health plan made available to the employee by an employer which is excludable from the employee's gross income under section 106, or would be so excludable if it were employer-provided coverage (within the meaning of such section 106).

I.R.C. § 4980I(d)(1)(B) Exceptions —

The term “applicable employer-sponsored coverage” shall not include—

I.R.C. § 4980I(d)(1)(B)(i) —

any coverage (whether through insurance or otherwise) described in section 9832(c)(1) (other than subparagraph (G) thereof) or for long-term care, or

I.R.C. § 4980I(d)(1)(B)(ii) —

any coverage under a separate policy, certificate, or contract of insurance which provides benefits substantially all of which are for treatment of the mouth (including any organ or structure within the mouth) or for treatment of the eye, or

I.R.C. § 4980I(d)(1)(B)(iii) —

any coverage described in section 9832(c)(3) the payment for which is not excludable from gross income and for which a deduction under section 162(l) is not allowable.

I.R.C. § 4980I(d)(1)(C) Coverage Includes Employee Paid Portion —

Coverage shall be treated as applicable employer-sponsored coverage without regard to whether the employer or employee pays for the coverage.

I.R.C. § 4980I(d)(1)(D) Self-Employed Individual —

In the case of an individual who is an employee within the meaning of section 401(c)(1), coverage under any group health plan providing health insurance coverage shall be treated as applicable employer-sponsored coverage if a deduction is allowable under section 162(l) with respect to all or any portion of the cost of the coverage.

I.R.C. § 4980I(d)(1)(E) Governmental Plans Included —

Applicable employer-sponsored coverage shall include coverage under any group health plan established and maintained primarily for its civilian employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any such government.

I.R.C. § 4980I(d)(2) Determination Of Cost

I.R.C. § 4980I(d)(2)(A) In General —

The cost of applicable employer-sponsored coverage shall be determined under rules similar to the rules of section 4980B(f)(4), except that in determining such cost, any portion of the cost of such coverage which is attributable to the tax imposed under this section shall not be taken into account and the amount of such cost shall be calculated separately for self-only coverage and other coverage. In the case of applicable employer-sponsored coverage which provides coverage to retired employees, the plan may elect to treat a retired employee who has not attained the age of 65 and a retired employee who has attained the age of 65 as similarly situated beneficiaries.

I.R.C. § 4980I(d)(2)(B) Health FSAs —

In the case of applicable employer-sponsored coverage consisting of coverage under a flexible spending arrangement (as defined in section 106(c)(2)), the cost of the coverage shall be equal to the sum of—

I.R.C. § 4980I(d)(2)(B)(i) —

the amount of employer contributions under any salary reduction election under the arrangement, plus

I.R.C. § 4980I(d)(2)(B)(ii) —

the amount determined under subparagraph (A) with respect to any reimbursement under the arrangement in excess of the contributions described in clause (i).

I.R.C. § 4980I(d)(2)(C) Archer MSAs And HSAs —

In the case of applicable employer-sponsored coverage consisting of coverage under an arrangement under which the employer makes contributions described in subsection (b) or (d) of section 106, the cost of the coverage shall be equal to the amount of employer contributions under the arrangement.

I.R.C. § 4980I(d)(2)(D) Qualified Small Employer Health Reimbursement Arrangements —

In the case of applicable employer-sponsored coverage consisting of coverage under any qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2)), the cost of coverage shall be equal to the amount described in section 6051(a)(15).

I.R.C. § 4980I(d)(2)(E) Allocation On A Monthly Basis —

If cost is determined on other than a monthly basis, the cost shall be allocated to months in a taxable period on such basis as the Secretary may prescribe.

I.R.C. § 4980I(d)(3) Employee —

The term “employee” includes any former employee, surviving spouse, or other primary insured individual.

I.R.C. § 4980I(e) Penalty For Failure To Properly Calculate Excess Benefit —

I.R.C. § 4980I(e)(1) In General —

If, for any taxable period, the tax imposed by subsection (a) exceeds the tax determined under such subsection with respect to the total excess benefit calculated by the employer or plan sponsor under subsection (c)(4)—

I.R.C. § 4980I(e)(1)(A) —

each coverage provider shall pay the tax on its applicable share (determined in the same manner as under subsection (c)(4)) of the excess, but no penalty shall be imposed on the provider with respect to such amount, and

I.R.C. § 4980I(e)(1)(B) —

the employer or plan sponsor shall, in addition to any tax imposed by subsection (a), pay a penalty in an amount equal to such excess, plus interest at the underpayment rate determined under section 6621 for the period beginning on the due date for the payment of tax imposed by subsection (a) to which the excess relates and ending on the date of payment of the penalty.

I.R.C. § 4980I(e)(2) Limitations On Penalty

I.R.C. § 4980I(e)(2)(A) Penalty Not To Apply Where Failure Not Discovered Exercising Reasonable Diligence —

No penalty shall be imposed by paragraph (1)(B) on any failure to properly calculate the excess benefit during any period for which it is established to the satisfaction of the Secretary that the employer or plan sponsor neither knew, nor exercising reasonable diligence would have known, that such failure existed.

I.R.C. § 4980I(e)(2)(B) Penalty Not To Apply To Failures Corrected Within 30 Days —

No penalty shall be imposed by paragraph (1)(B) on any such failure if—

I.R.C. § 4980I(e)(2)(B)(i) —

such failure was due to reasonable cause and not to willful neglect, and

I.R.C. § 4980I(e)(2)(B)(ii) —

such failure is corrected during the 30-day period beginning on the 1st date that the employer knew, or exercising reasonable diligence would have known, that such failure existed.

I.R.C. § 4980I(e)(2)(C) Waiver By Secretary —

In the case of any such failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the penalty imposed by paragraph (1), to the extent that the payment of such penalty would be excessive or otherwise inequitable relative to the failure involved.

I.R.C. § 4980I(f) Other Definitions And Special Rules —

For purposes of this section—

I.R.C. § 4980I(f)(1) Coverage Determinations

I.R.C. § 4980I(f)(1)(A) In General —

Except as provided in subparagraph (B), an employee shall be treated as having self-only coverage with respect to any applicable employer-sponsored coverage of an employer.

I.R.C. § 4980I(f)(1)(B) Minimum Essential Coverage —

An employee shall be treated as having coverage other than self-only coverage only if the employee is enrolled in coverage other than self-only coverage in a group health plan which provides minimum essential coverage (as defined in section 5000A(f)) to the employee and at least one other beneficiary, and the benefits provided under such minimum essential coverage do not vary based on whether any individual covered under such coverage is the employee or another beneficiary.

I.R.C. § 4980I(f)(2) Qualified Retiree —

The term “qualified retiree” means any individual who—

I.R.C. § 4980I(f)(2)(A) —

is receiving coverage by reason of being a retiree,

I.R.C. § 4980I(f)(2)(B) —

has attained age 55, and

I.R.C. § 4980I(f)(2)(C) —

is not entitled to benefits or eligible for enrollment under the Medicare program under title XVIII of the Social Security Act.

I.R.C. § 4980I(f)(3) Employees Engaged In High-Risk Profession —

The term “employees engaged in a high-risk profession” means law enforcement officers (as such term is defined in section 1204 of the Omnibus Crime Control and Safe Streets Act of 1968), employees in fire protection activities (as such term is defined in section 3(y) of the Fair Labor Standards Act of 1938), individuals who provide out-of-hospital emergency medical care (including emergency medical technicians, paramedics, and first-responders), individuals whose primary work is longshore work (as defined in section 258(b) of the Immigration and Nationality Act (8 U.S.C. 1288(b)), determined without regard to paragraph (2) thereof), and individuals engaged in the construction, mining, agriculture (not including food processing), forestry, and fishing industries. Such term includes an employee who is retired from a high-risk profession described in the preceding sentence, if such employee satisfied the requirements of such sentence for a period of not less than 20 years during the employee's employment.

I.R.C. § 4980I(f)(4) Group Health Plan —

The term “group health plan” has the meaning given such term by section 5000(b)(1). Section 9831(d)(1) shall not apply for purposes of this section.

I.R.C. § 4980I(f)(5) Health Insurance Coverage; Health Insurance Issuer

I.R.C. § 4980I(f)(5)(A) Health Insurance Coverage —

The term “health insurance coverage” has the meaning given such term by section 9832(b)(1) (applied without regard to subparagraph (B) thereof, except as provided by the Secretary in regulations).

I.R.C. § 4980I(f)(5)(B) Health Insurance Issuer —

The term “health insurance issuer” has the meaning given such term by section 9832(b)(2).

I.R.C. § 4980I(f)(6) Person That Administers The Plan Benefits —

The term “person that administers the plan benefits” shall include the plan sponsor if the plan sponsor administers benefits under the plan.

I.R.C. § 4980I(f)(7) Plan Sponsor —

The term “plan sponsor” has the meaning given such term in section 3(16)(B) of the Employee Retirement Income Security Act of 1974.

I.R.C. § 4980I(f)(8) Taxable Period —

The term “taxable period” means the calendar year or such shorter period as the Secretary may prescribe. The Secretary may have different taxable periods for employers of varying sizes.

I.R.C. § 4980I(f)(9) Aggregation Rules —

All employers treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as a single employer.

I.R.C. § 4980I(f)(10) Deductibility Of Tax —

Section 275(a)(6) shall not apply to the tax imposed by subsection (a).

I.R.C. § 4980I(g) Regulations —

The Secretary shall prescribe such regulations as may be necessary to carry out this section.

(Added by Pub. L. 111-148, Sec. 9001(a), 10901, Mar. 23, 2010, 124 Stat. 119; and amended by Pub. L. 111-152, Sec. 1401, Mar. 30, 2010, 124 Stat. 1029; Pub. L. 114-113, Div. P, title I, Sec. 101(b), 102, Dec. 18, 2015; Pub. L. 114-255, Div. C, title XVIII, Sec. 18001(a)(4), Dec. 13, 2016; Pub. L. 115-97, title I, Sec. 11002(d)(12), Dec. 22, 2017, 131 Stat. 2054; Pub. L. 115-120, Div. D, Sec. 4002, Jan. 22, 2018; Pub. L. 115-141, Div. U, title IV, Sec. 401(a)(237), (238), Mar. 23, 2018, 132 Stat. 348; struck by Pub. L. 116-94, Div. N, title V, Sec. 503(a), Dec. 20, 2019.)

BACKGROUND NOTES

AMENDMENTS

Sec. 4980I. Pub. L. 116-94, Div. N, Sec. 503(a), struck Sec. 4980I. Before being struck, it read as follows:

“Sec. 4980I. Excise Tax On High Cost Employer-Sponsored Health Coverage

“(a) Imposition Of Tax.—If—

“(1) an employee is covered under any applicable employer-sponsored coverage of an employer at any time during a taxable period, and

“(2) there is any excess benefit with respect to the coverage,

“there is hereby imposed a tax equal to 40 percent of the excess benefit.

“(b) Excess Benefit.— For purposes of this section

“(1) In General.—The term “excess benefit” means, with respect to any applicable employer-sponsored coverage made available by an employer to an employee during any taxable period, the sum of the excess amounts determined under paragraph (2) for months during the taxable period.

“(2) Monthly Excess Amount.—The excess amount determined under this paragraph for any month is the excess (if any) of—

“(A) the aggregate cost of the applicable employer-sponsored coverage of the employee for the month, over

“(B) an amount equal to 1/12 of the annual limitation under paragraph (3) for the calendar year in which the month occurs.

“(3) Annual Limitation.—For purposes of this subsection—

“(A) In General.—The annual limitation under this paragraph for any calendar year is the dollar limit determined under subparagraph (C) for the calendar year.

“(B) Applicable Annual Limitation.—

“(i) In General.—Except as provided in clause (ii), the annual limitation which applies for any month shall be determined on the basis of the type of coverage (as determined under subsection (f)(1)) provided to the employee by the employer as of the beginning of the month.

“(ii) Multiemployer Plan Coverage.—Any coverage provided under a multiemployer plan (as defined in section 414(f)) shall be treated as coverage other than self-only coverage.

“(C) Applicable Dollar Limit.—

“(i) 2018.—In the case of 2018, the dollar limit under this subparagraph is—

“(I) in the case of an employee with self-only coverage, $10,200 multiplied by the health cost adjustment percentage (determined by only taking into account self-only coverage), and

“(II) in the case of an employee with coverage other than self-only coverage, $27,500 multiplied by the health cost adjustment percentage (determined by only taking into account coverage other than self-only coverage).

“(ii) Health Cost Adjustment Percentage.—For purposes of clause (i), the health cost adjustment percentage is equal to 100 percent plus the excess (if any) of—

“(I) the percentage by which the per employee cost for providing coverage under the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan for plan year 2018 (determined by using the benefit package for such coverage in 2010) exceeds such cost for plan year 2010, over

“(II) 55 percent.

“(iii) Age And Gender Adjustment.—

“(I) In General.—The amount determined under subclause (I) or (II) of clause (i), whichever is applicable, for any taxable period shall be increased by the amount determined under subclause (II).

“(II) Amount Determined.—The amount determined under this subclause is an amount equal to the excess (if any) of—

“(aa) the premium cost of the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan for the type of coverage provided such individual in such taxable period if priced for the age and gender characteristics of all employees of the individual's employer, over

“(bb) that premium cost for the provision of such coverage under such option in such taxable period if priced for the age and gender characteristics of the national workforce.

“(iv) Exception For Certain Individuals.—In the case of an individual who is a qualified retiree or who participates in a plan sponsored by an employer the majority of whose employees covered by the plan are engaged in a high-risk profession or employed to repair or install electrical or telecommunications lines—

“(I) the dollar amount in clause (i)(I) shall be increased by $1,650, and

“(II) the dollar amount in clause (i)(II) shall be increased by $3,450.

“(v) Subsequent Years.—In the case of any calendar year after 2018, each of the dollar amounts under clauses (i) (after the application of clause (ii)) and (iv) shall be increased to the amount equal to such amount as determined for the calendar year preceding such year, increased by an amount equal to the product of—

“(I) such amount as so determined, multiplied by

“(II) the cost-of-living adjustment determined under section 1(f)(3) for such year (determined by substituting the calendar year that is 2 years before such year for “2016” in subparagraph (A)(ii) thereof), increased by 1 percentage point in the case of determinations for calendar years beginning before 2020.

“If any amount determined under this clause is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.

“(c) Liability To Pay Tax.—

“(1) In General.—Each coverage provider shall pay the tax imposed by subsection (a) on its applicable share of the excess benefit with respect to an employee for any taxable period.

“(2) Coverage Provider.—For purposes of this subsection, the term “coverage provider” means each of the following:

“(A) Health Insurance Coverage.—If the applicable employer-sponsored coverage consists of coverage under a group health plan which provides health insurance coverage, the health insurance issuer.

“(B) HSA And MSA Contributions.—If the applicable employer-sponsored coverage consists of coverage under an arrangement under which the employer makes contributions described in subsection (b) or (d) of section 106, the employer.

“(C) Other Coverage.—In the case of any other applicable employer-sponsored coverage, the person that administers the plan benefits.

“(3) Applicable Share.—For purposes of this subsection, a coverage provider's applicable share of an excess benefit for any taxable period is the amount which bears the same ratio to the amount of such excess benefit as—

“(A) the cost of the applicable employer-sponsored coverage provided by the provider to the employee during such period, bears to

“(B) the aggregate cost of all applicable employer-sponsored coverage provided to the employee by all coverage providers during such period.

“(4) Responsibility To Calculate Tax And Applicable Shares.—

“(A) In General.—Each employer shall—

“(i) calculate for each taxable period the amount of the excess benefit subject to the tax imposed by subsection (a) and the applicable share of such excess benefit for each coverage provider, and

“(ii) notify, at such time and in such manner as the Secretary may prescribe, the Secretary and each coverage provider of the amount so determined for the provider.

“(B) Special Rule For Multiemployer Plans.—In the case of applicable employer-sponsored coverage made available to employees through a multiemployer plan (as defined in section 414(f)), the plan sponsor shall make the calculations, and provide the notice, required under subparagraph (A).

“(d) Applicable Employer-Sponsored Coverage; Cost.—For purposes of this section—

“(1) Applicable Employer-Sponsored Coverage.—

“(A) In General.—The term “applicable employer-sponsored coverage” means, with respect to any employee, coverage under any group health plan made available to the employee by an employer which is excludable from the employee's gross income under section 106, or would be so excludable if it were employer-provided coverage (within the meaning of such section 106).

“(B) Exceptions.—The term “applicable employer-sponsored coverage” shall not include—

“(i) any coverage (whether through insurance or otherwise) described in section 9832(c)(1) (other than subparagraph (G) thereof) or for long-term care, or

“(ii) any coverage under a separate policy, certificate, or contract of insurance which provides benefits substantially all of which are for treatment of the mouth (including any organ or structure within the mouth) or for treatment of the eye, or

“(iii) any coverage described in section 9832(c)(3) the payment for which is not excludable from gross income and for which a deduction under section 162(l) is not allowable.

“(C) Coverage Includes Employee Paid Portion.—Coverage shall be treated as applicable employer-sponsored coverage without regard to whether the employer or employee pays for the coverage.

“(D) Self-Employed Individual.—In the case of an individual who is an employee within the meaning of section 401(c)(1), coverage under any group health plan providing health insurance coverage shall be treated as applicable employer-sponsored coverage if a deduction is allowable under section 162(l) with respect to all or any portion of the cost of the coverage.

“(E) Governmental Plans Included.—Applicable employer-sponsored coverage shall include coverage under any group health plan established and maintained primarily for its civilian employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any such government.

“(2) Determination Of Cost.—

“(A) In General.—The cost of applicable employer-sponsored coverage shall be determined under rules similar to the rules of section 4980B(f)(4), except that in determining such cost, any portion of the cost of such coverage which is attributable to the tax imposed under this section shall not be taken into account and the amount of such cost shall be calculated separately for self-only coverage and other coverage. In the case of applicable employer-sponsored coverage which provides coverage to retired employees, the plan may elect to treat a retired employee who has not attained the age of 65 and a retired employee who has attained the age of 65 as similarly situated beneficiaries.

“(B) Health FSAs.—In the case of applicable employer-sponsored coverage consisting of coverage under a flexible spending arrangement (as defined in section 106(c)(2)), the cost of the coverage shall be equal to the sum of—

“(i) the amount of employer contributions under any salary reduction election under the arrangement, plus

“(ii) the amount determined under subparagraph (A) with respect to any reimbursement under the arrangement in excess of the contributions described in clause (i).

“(C) Archer MSAs And HSAs.—In the case of applicable employer-sponsored coverage consisting of coverage under an arrangement under which the employer makes contributions described in subsection (b) or (d) of section 106, the cost of the coverage shall be equal to the amount of employer contributions under the arrangement.

“(D) Qualified Small Employer Health Reimbursement Arrangements.—In the case of applicable employer-sponsored coverage consisting of coverage under any qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2)), the cost of coverage shall be equal to the amount described in section 6051(a)(15).

“(E) Allocation On A Monthly Basis.—If cost is determined on other than a monthly basis, the cost shall be allocated to months in a taxable period on such basis as the Secretary may prescribe.

“(3) Employee.—The term “employee” includes any former employee, surviving spouse, or other primary insured individual.

“(e) Penalty For Failure To Properly Calculate Excess Benefit.—

“(1) In General.—If, for any taxable period, the tax imposed by subsection (a) exceeds the tax determined under such subsection with respect to the total excess benefit calculated by the employer or plan sponsor under subsection (c)(4)—

“(A) each coverage provider shall pay the tax on its applicable share (determined in the same manner as under subsection (c)(4)) of the excess, but no penalty shall be imposed on the provider with respect to such amount, and

“(B) the employer or plan sponsor shall, in addition to any tax imposed by subsection (a), pay a penalty in an amount equal to such excess, plus interest at the underpayment rate determined under section 6621 for the period beginning on the due date for the payment of tax imposed by subsection (a) to which the excess relates and ending on the date of payment of the penalty.

“(2) Limitations On Penalty.—

“(A) Penalty Not To Apply Where Failure Not Discovered Exercising Reasonable Diligence.—No penalty shall be imposed by paragraph (1)(B) on any failure to properly calculate the excess benefit during any period for which it is established to the satisfaction of the Secretary that the employer or plan sponsor neither knew, nor exercising reasonable diligence would have known, that such failure existed.

“(B) Penalty Not To Apply To Failures Corrected Within 30 Days.—No penalty shall be imposed by paragraph (1)(B) on any such failure if—

“(i) such failure was due to reasonable cause and not to willful neglect, and

“(ii) such failure is corrected during the 30-day period beginning on the 1st date that the employer knew, or exercising reasonable diligence would have known, that such failure existed.

“(C) Waiver By Secretary.—In the case of any such failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the penalty imposed by paragraph (1), to the extent that the payment of such penalty would be excessive or otherwise inequitable relative to the failure involved.

“(f) Other Definitions And Special Rules.—For purposes of this section—

“(1) Coverage Determinations.—

“(A) In General.—Except as provided in subparagraph (B), an employee shall be treated as having self-only coverage with respect to any applicable employer-sponsored coverage of an employer.

“(B) Minimum Essential Coverage.—An employee shall be treated as having coverage other than self-only coverage only if the employee is enrolled in coverage other than self-only coverage in a group health plan which provides minimum essential coverage (as defined in section 5000A(f)) to the employee and at least one other beneficiary, and the benefits provided under such minimum essential coverage do not vary based on whether any individual covered under such coverage is the employee or another beneficiary.

“(2) Qualified Retiree.—The term “qualified retiree” means any individual who—

“(A) is receiving coverage by reason of being a retiree,

“B) has attained age 55, and

“(C) is not entitled to benefits or eligible for enrollment under the Medicare program under title XVIII of the Social Security Act.

“(3) Employees Engaged In High-Risk Profession.—The term “employees engaged in a high-risk profession” means law enforcement officers (as such term is defined in section 1204 of the Omnibus Crime Control and Safe Streets Act of 1968), employees in fire protection activities (as such term is defined in section 3(y) of the Fair Labor Standards Act of 1938), individuals who provide out-of-hospital emergency medical care (including emergency medical technicians, paramedics, and first-responders), individuals whose primary work is longshore work (as defined in section 258(b) of the Immigration and Nationality Act (8 U.S.C. 1288(b)), determined without regard to paragraph (2) thereof), and individuals engaged in the construction, mining, agriculture (not including food processing), forestry, and fishing industries. Such term includes an employee who is retired from a high-risk profession described in the preceding sentence, if such employee satisfied the requirements of such sentence for a period of not less than 20 years during the employee's employment.

“(4) Group Health Plan.—The term “group health plan” has the meaning given such term by section 5000(b)(1). Section 9831(d)(1) shall not apply for purposes of this section.

“(5) Health Insurance Coverage; Health Insurance Issuer.—

“(A) Health Insurance Coverage.—The term “health insurance coverage” has the meaning given such term by section 9832(b)(1) (applied without regard to subparagraph (B) thereof, except as provided by the Secretary in regulations).

“(B) Health Insurance Issuer.—The term “health insurance issuer” has the meaning given such term by section 9832(b)(2).

“(6) Person That Administers The Plan Benefits.—The term “person that administers the plan benefits” shall include the plan sponsor if the plan sponsor administers benefits under the plan.

“(7) Plan Sponsor.—The term “plan sponsor” has the meaning given such term in section 3(16)(B) of the Employee Retirement Income Security Act of 1974.

“(8) Taxable Period.—The term “taxable period” means the calendar year or such shorter period as the Secretary may prescribe. The Secretary may have different taxable periods for employers of varying sizes.

“(9) Aggregation Rules.—All employers treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as a single employer.

“(10) Deductibility Of Tax.—Section 275(a)(6) shall not apply to the tax imposed by subsection (a).

“(g) Regulations.—The Secretary shall prescribe such regulations as may be necessary to carry out this section.”

2018 - Subsec. (b)(3)(C)(iv). Pub. L. 115-141, Div. U, Sec. 401(a)(237), amended clause (iv) by substituting a period for the comma at the end.

Subsec. (b)(3)(C)(v). Pub. L. 115-141, Div. U, Sec. 401(a)(238), amended clause (v) by substituting “for” for “for for”.

2017 — Subsec. (b)(3)(C)(v)(II). Pub. L. 115-97, Sec. 11002(d)(12), amended subclause (II) by substituting “for ‘2016’ in subparagraph (A)(ii)” for “for ‘1992’ in subparagraph (B)”.

2016 - Subsec. (d)(2)(D)-(E). Pub. L. 114-255, Sec. 18001(a)(4)(B), amended par. (2) by redesignating subpar. (D) as subpar. (E) and adding new subpar. (D).

Subsec. (f)(4). Pub. L. 114-255, Sec. 18001(a)(4)(A), amended par. (4) by adding ‘‘Section 9831(d)(1) shall not apply for purposes of this section.” at the end.

2015 - Subsec. (b)(3)(C)(v). Pub. L. 114-113, Div. P, Sec. 101(b), amended clause (v) by substituting “as determined for” for “as in effect” and by substituting “as so determined” for “as so in effect”.

Subsec. (f)(10). Pub. L. 114-113, Div. P, Sec. 102, amended par. (10). Before amendment, it read as follows:

“(10) Denial Of Deduction.—For denial of a deduction for the tax imposed by this section, see section 275(a)(6).”

2010 - Subsec. (b)(3)(B). Pub. L. 111-152, Sec. 1401(a)(1), amended subpar. (B) by substituting “(i) In General.—Except as provided in clause (ii), the annual” for “The annual” and by adding clause (ii).

Subsec. (b)(3)(C). Pub. L. 111-152, Sec. 1401(a)(2)(A), amended subpar. (C) by striking “Except as provided in subparagraph (D)—“ in the matter preceding clause (i).

Subsec. (b)(3)(C)(i). Pub. L. 111-152, Sec. 1401(a)(2)(B)(i), amended clause (i) by substituting “2018” for “2013” in the heading and text.

Subsec. (b)(3)(C)(i)(I). Pub. L. 111-152, Sec. 1401(a)(2)(B)(ii), amended subclause (I) by substituting “$10,200 multiplied by the health cost adjustment percentage (determined by only taking into account self-only coverage)” for “$8,500”.

Subsec. (b)(3)(C)(i)(II). Pub. L. 111-152, Sec. 1401(a)(2)(B)(iii), amended subclause (II) by substituting “$27,500 multiplied by the health cost adjustment percentage (determined by only taking into account coverage other than self-only coverage)” for “$23,000”.

Subsec. (b)(3)(C)(ii)-(iii). Pub. L. 111-152, Sec. 1401(a)(2)(C), amended subpar. (C) by redesignating clauses (ii)-(iii) as clauses (iv)-(v), respectively, and by adding clauses (ii) and (iii).

Subsec. (b)(3)(C)(iv) (as redesignated). Pub. L. 111-152, Sec. 1401(a)(2)(D)(i), amended clause (iv) by inserting “covered by the plan” after “whose employees” and by striking subclauses (I) and (II) and adding new subclauses (I) and (II). Before being struck, subclauses (I) and (II) read as follows:

“(I) the dollar amount in clause (i)(I) (determined after the application of subparagraph (D)) shall be increased by $1,350, and

“(II) the dollar amount in clause (i)(II) (determined after the application of subparagraph (D)) shall be increased by $3,000.”

Subsec. (b)(3)(v) (as redesignated). Pub. L. 111-152, Sec. 1401(a)(2)(E), amended clause (v) by substituting “2018” for “2013”; by substituting “clauses (i) (after the application of clause (ii)) and (iv)” for “clauses (i) and (ii)”; and by inserting “in the case of determinations for calendar years beginning before 2010” after “1 percentage point”.

Subsec. (b)(3)(D). Pub. L. 111-152, Sec. 1401(a)(3), amended par. (3) by striking subpar. (D). Before being struck, it read as follows:

“(D) Transition Rule For States With Highest Coverage Costs.—

“(i) In General.—If an employee is a resident of a high cost State on the first day of any month beginning in 2013, 2014, or 2015, the annual limitation under this paragraph for such month with respect to such employee shall be an amount equal to the applicable percentage of the annual limitation (determined without regard to this subparagraph or subparagraph (C)(ii)).

“(ii) Applicable Percentage.—The applicable percentage is 120 percent for 2013, 110 percent for 2014, and 105 percent for 2015.

“(iii) High Cost State.—The term “high cost State” means each of the 17 States which the Secretary of Health and Human Services, in consultation with the Secretary, estimates had the highest average cost during 2012 for employer-sponsored coverage under health plans. The Secretary's estimate shall be made on the basis of aggregate premiums paid in the State for such health plans, determined using the most recent data available as of August 31, 2012.”

Subsec. (d)(1)(B). Pub. L. 111-152, Sec. 1401(a)(4), amended subpar. (B) by redesignating clause (ii) as clause (iii) and adding clause (ii).

Subsec. (d)(3). Pub. L. 111-152, Sec. 1401(a)(5), amended subsec. (d) by adding par. (3).

Subsec. (d)(1)(B)(i). Pub. L. 111-148, Sec. 10901(b), amended clause (i) by substituting “section 9832(c)(1) (other than subparagraph (G) thereof)” for “section 9832(c)(1)(A)”.

Subsec. (f)(3). Pub. L. 111-148, Sec. 10901(a), amended par. (3) by inserting ‘’individuals whose primary work is longshore work (as defined in section 258(b) of the Immigration and Nationality Act (8 U.S.C. 1288(b)), determined without regard to paragraph (2) thereof),” before ‘’and individuals engaged in the construction, mining”.

EFFECTIVE DATE OF REPEAL

Effective for taxable years beginning after December 31, 2019.

EFFECTIVE DATE OF 2018 AMENDMENTS

Amendments by Pub. L. No. 115-141, Div. U, Sec. 401(a)(237), (238), effective on the date of the enactment of this Act [Enacted: Mar. 23, 2018].

Amendment by Pub. L. 115-120, Div. D, Sec. 4002, effective for taxable years beginning after December 31, 2021.

EFFECTIVE DATE OF 2017 AMENDMENT

Amendment by Pub. L. 115-97, Sec. 11002(d)(12), effective for taxable years beginning after December 31, 2017.

EFFECTIVE DATE OF 2016 AMENDMENTS

Amendments by Pub. L. 114-255, Div. C, Sec. 18001(a)(4), effective for years beginning after December 31, 2016.

EFFECTIVE DATE OF 2015 AMENDMENTS

Amendments by Pub. L. 114-113, Div. P, Sec. 101(b), effective on the date of the enactment of this Act [Enacted: Dec. 18, 2015].

Amendment by Pub. L. 114-113, Div. P, Sec. 102, effective on the date of the enactment of this Act [Enacted: Dec. 18, 2015].

EFFECTIVE DATE OF 2010 AMENDMENTS

Amendments by Sec. 1401 of Pub. L. 111-152 effective on the date of the enactment of this Act [Enacted: Mar. 30, 2010].

Amendments by Sec. 10901 of Pub. L. 111-148, as amended by Pub. L. 111-152, Sec. 1401(b)(2), and Pub. L. 114-113, Div. P, Sec. 101(a), effective for taxable years beginning after December 31, 2019.

STUDY ON SUITABLE BENCHMARKS FOR AGE AND GENDER ADJUSTMENT OF EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED HEALTH COVERAGE.

Pub. L. 114-113, Div. P, Sec. 103 provided the following:

“SEC. 103. STUDY ON SUITABLE BENCHMARKS FOR AGE AND GENDER ADJUSTMENT OF EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED HEALTH COVERAGE.

“Not later than 18 months after the date of the enactment of this Act, the Comptroller General of the United States, in consultation with the National Association of Insurance Commissioners, shall report to the Committee on Finance of the Senate and the Committee on Ways and Means of the House of Representatives on—

“(1) the suitability of the use (in effect under section 4980I(b)(3)(C)(iii)(II) of the Internal Revenue Codeof 1986 as of the date of the enactment of this Act) of the premium cost of the Blue Cross/Blue Shield standard benefit option under the Federal Employees Health Benefits Plan as a benchmark for the age and gender adjustment of the applicable dollar limit with respect to the excise tax on high cost employer-sponsored health coverage under section 4980I of the Internal Revenue Code of 1986; and

“(2) recommendations regarding any more suitable benchmarks for such age and gender adjustment.”

EFFECTIVE DATE

Section 9001(c) of Pub. L. 111-148, as amended by Pub. L. 111-152, Pub. L. 114-113, and Pub. L. 115-120, provided the following effective date:

Effective for taxable years beginning after December 31, 2021.

Sec. 4980I. Excise Tax On High Cost Employer-Sponsored Health Coverage [Repealed]

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